Hayek and the Bureau for Claims Settlements

According to Article 248 of the Treaty, the new Austria had to pay damages to foreign governments and their citizens. These foreign beneficiaries were not limited to the Entente powers, but included the non-German territories of the old Austria, which according to the stipulations of the Treaty were counted as states “associated” with the Entente. Article 248 had largely been copied from an analogous provision in the Treaty of Versailles, which concerned the much less complicated case of Germany. It was completely unclear how it should be put into practice in the Austrian case. Once again, it was the public-administration experts from the Vienna Kammer who had to find a way out.

During the war, Mises's friend Emil Perels had founded an Office for the Protection of Austrian Assets Abroad,² the purpose of which was to protect the private claims of the citizens of Austria-Hungary, and to establish records of existing claims of these citizens on those of enemy countries. After the ratification of the Treaty of Saint-Germain in the fall of 1920, the Austrian government transformed this organization into the Abrechnungsamt, a governmental bureau for claim settlements. Perels remained the chief executive and several other men were also appointed to its board, Mises among them. The two Kammer secretaries shared a predilection for efficient organization and kept the new Bureau for Claims Settlements as small as possible. While its German equivalent in Berlin had more than 1,000 employees by 1922, the Vienna organization, which had to deal with far more complicated cases, had a headcount of 150.³

In June of 1922, Perels left the Bureau for a more prestigious appointment and Mises succeeded him. Two and a half years later, Mises quit the position too, ostensibly because his new position as a vice-director of the Kammer and his research agenda did not leave him enough time to shoulder the responsibilities of the office. His former employees praised him for using his contacts in industrial and banking circles for the successful floating of a Bureau Bond (Abrechnungsschuldverschreibung) to finance the payments resulting from the settlement process.⁴ But the newspapers reported on conflicts between Mises and the Finance Ministry concerning payments of prewar debts, which the Ministry had delayed.⁵ In short, the problem was that Mises had persuaded certain people to finance his government, and now the government refused to pay them back. Mises wanted no part of such an organization.

For Mises himself, the time he spent at the Bureau for Claims Settlements was especially memorable because it brought him in touch with the young student who would eventually become his most important intellectual ally and a friend for many years. By December 1921, Friedrich August von Hayek (1899–1992) had received his first doctorate (in law) when he applied for a position at the Bureau. Mises himself conducted the interview. Hayek presented a letter of recommendation from Friedrich von Wieser, who praised him as a promising young economist.⁶ Mises smiled and said he had never seen Hayek in his lectures. But given Wieser's letter it would be rude to reject the young man, so he hired him on the spot. Mises assigned him to research money and banking theory. Hayek quickly showed himself a useful assistant, alerting Mises to the case for free banking.

Friedrich August von Hayek

More than any of his fellow students, Hayek was an adventurer. His peers Haberler and Voegelin were anxious not to leave the well-trodden career route. They eventually left Vienna to study in the United States when prestigious Rockefeller stipends became available for Austrian students in 1924.⁷ But Hayek was curious enough to travel to New York on his own, with no money and only his capacity and readiness for intellectual hard work. Mises encouraged and supported the project.

Upon receiving his second doctorate (in economics), Hayek left for New York City in March 1923 and stayed until May 1924.⁸ He found employment as a translator for economics professor Jeremiah W. Jenks, whom he had met in Vienna in the spring of 1922. Later he also worked for Professor Wesley Mitchell at the National Bureau for Economic Research, collecting data for his book on business cycles.⁹ Mitchell was a great admirer of Wieser's, and Hayek provided him with background information that Mitchell used in his preface for the American edition of Wieser's textbook. Hayek also talked to him about Mises. To Mitchell's mild astonishment, Hayek put Mises in the same class as Voltaire, Montesquieu, Tocqueville, and John Stuart Mill.¹⁰

When Hayek returned to Vienna, he was thoroughly acquainted with American methods of business cycle research, knowledge that would prove to be highly useful two years later, when Mises established an Austrian Institute for Business Cycle Research—mainly to provide Hayek with a suitable position. Hayek's teacher Wieser had been the main contact of the Rockefeller Foundation among the academic economists in Vienna. He made sure that Hayek was granted the first Rockefeller fellowship, while he was still in Manhattan. But the notification reached the young man only after he had already returned to Vienna.¹¹ By then he was unwilling to accept the fellowship. Mises then tried to hire Hayek for the Kammer library, but it was Haberler who eventually obtained the position.¹² These early problems foreshadowed Hayek's lifetime lack of talent as a careerist.